<PAGE>
United States Securities And Exchange Commission
Washington, DC 20549
Form 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended June 30, 1994
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-7083 .
------------------
Crestar Financial Corporation
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0722175
- - --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
919 E. Main Street, P.O. Box 26665, Richmond, Virginia 23261-6665
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(804)782-5000
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
---------- -----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1994
- - ----------------------------------- -----------------------------------
Common Stock, $5 par value 37,715,782
1
<PAGE>
Crestar Financial Corporation And Subsidiaries
Form 10-Q
For The Quarter Ended June 30, 1994
<TABLE>
<CAPTION>
Part I. Financial Information
<S> <C>
Item 1. Financial Statements:
Page
Consolidated Balance Sheets...........................3
Consolidated Statements Of Income.....................4
Consolidated Statements Of Cash Flows.................5
Consolidated Statements Of Changes In
Shareholders' Equity..................................6
Notes To Consolidated Financial Statements.........7-15
Item 2. Management's Discussion And Analysis Of Financial
Condition And Results Of Operations:
Financial Commentary..............................16-30
</TABLE>
<TABLE>
<CAPTION>
Part II. Other Information
<S> <C>
Item 4. Submission Of Matters To A Vote Of Security Holders..31
Item 6. Exhibits And Reports On Form 8-K:
There were no reports on Form 8-K filed during the three
months ended June 30, 1994.
</TABLE>
2
<PAGE>
Consolidated Balance Sheets
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
Dollars in thousands June 30, December 31,
---------------------------
<S> <C> <C> <C>
Assets 1994 1993 1993
Cash and due from banks $ 581,521 $ 741,213 $ 716,652
Securities held to maturity (note 2) 996,038 2,093,331 1,824,617
Securities available for sale (note 3) 1,993,913 1,601,967 1,697,000
Money market investments (note 4) 1,243,975 548,049 650,633
Mortgage loans held for sale 275,527 374,461 591,233
Loans - net of unearned income (note 5):
Commercial 2,737,617 2,624,495 2,608,069
Tax-exempt 216,488 261,060 230,852
Instalment 1,720,865 1,468,883 1,532,936
Bank card 1,154,017 692,339 976,200
Real estate 2,527,821 1,924,929 1,713,876
Construction 231,241 251,061 224,460
Foreign 791 12 729
- - -------------------------------------------------------------------------------------------
Loans - net of unearned income of $1,925
and $4,625 at June 30, 1994 and 1993,
respectively, and $2,988 at
December 31, 1993 8,588,840 7,222,779 7,287,122
Less: Allowance for loan losses (note 6) (226,666) (212,981) (210,958)
- - -------------------------------------------------------------------------------------------
Loans - net 8,362,174 7,009,798 7,076,164
- - -------------------------------------------------------------------------------------------
Premises and equipment - net 321,709 298,995 302,704
Customers' liability on acceptances 4,777 14,406 11,578
Intangible assets - net (note 7) 146,612 106,492 96,152
Foreclosed properties - net (notes 5 and 8) 25,000 45,033 16,951
Other assets 373,964 408,407 303,263
- - -------------------------------------------------------------------------------------------
Total Assets $14,325,210 $13,242,152 $13,286,947
===========================================================================================
Liabilities
Demand deposits $ 2,268,488 $ 2,061,148 $ 2,234,536
Interest checking deposits 1,866,427 1,624,424 1,791,100
Money market deposit accounts 2,366,184 2,360,089 2,214,537
Regular savings deposits 1,508,459 1,146,626 1,241,592
Money market certificates 708,980 599,428 538,869
Other domestic time deposits 2,612,744 2,211,454 2,097,448
Certificates of deposit $100,000 and over 65,188 44,507 45,914
Deposits in foreign offices - 1,782 1,782
- - -------------------------------------------------------------------------------------------
Total deposits 11,396,470 10,049,458 10,165,778
Short-term borrowings (note 9) 1,326,996 1,589,364 1,616,743
Liability on acceptances 4,777 14,406 11,578
Other liabilities 269,864 261,941 239,215
Long-term debt (note 10) 222,419 260,758 191,156
- - -------------------------------------------------------------------------------------------
Total Liabilities 13,220,526 12,175,927 12,224,470
- - -------------------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock. Authorized 2,000,000 shares;
issued and outstanding:
Adjustable Rate Cumulative Series B, $50
stated value;
900,000 shares at June 30, 1993 - 45,000 -
Common stock, $5 par value. Authorized
100,000,000 shares;
outstanding 37,717,023 and 37,720,229 at
June 30, 1994 and 1993, respectively, and
37,515,671 shares at December 31, 1993 188,585 188,601 187,578
Capital surplus 273,169 242,001 248,896
Retained earnings 663,761 590,623 626,003
Net unrealized loss on securities available
for sale (note 15) (20,831) - -
- - -------------------------------------------------------------------------------------------
Total Shareholders' Equity 1,104,684 1,066,225 1,062,477
- - -------------------------------------------------------------------------------------------
Total Liabilities And Shareholders' Equity $14,325,210 $13,242,152 $13,286,947
===========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Consolidated Statements Of Income
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
Dollars In thousands, except per share data Three Months Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Income From Earning Assets 1994 1993 1994 1993
Interest and fees on loans $169,024 $141,701 $323,988 $280,165
Interest and dividends on taxable securities
held to maturity 15,087 29,400 23,987 57,007
Interest on tax-exempt securities held to maturity 1,241 1,735 2,625 3,720
Interest and dividends on securities available for
sale 30,869 20,799 71,118 40,508
Income on money market investments 6,698 6,046 10,807 15,339
Interest on mortgage loans held for sale 5,453 5,247 12,877 10,314
- - --------------------------------------------------------------------------------------------------------------
Total income from earning assets 228,372 204,928 445,402 407,053
- - --------------------------------------------------------------------------------------------------------------
Interest Expense
Interest checking deposits 10,405 9,533 20,146 18,806
Money market deposit accounts 15,622 14,965 29,371 29,954
Regular savings deposits 9,393 7,794 17,714 14,651
Money market certificates 5,498 4,544 9,795 9,535
Other domestic time deposits 27,907 24,322 52,815 48,716
Certificates of deposit $100,000 and over 573 496 1,047 1,052
Deposits in foreign offices - 18 11 35
- - --------------------------------------------------------------------------------------------------------------
Total interest on deposits 69,398 61,672 130,899 122,749
Short-term borrowings 9,380 9,833 19,993 21,889
Long-term debt 4,665 4,618 8,915 9,008
- - --------------------------------------------------------------------------------------------------------------
Total interest expense 83,443 76,123 159,807 153,646
- - --------------------------------------------------------------------------------------------------------------
Net Interest Income 144,929 128,805 285,595 253,407
Provision for loan losses (note 6) 8,850 3,006 18,882 21,506
- - --------------------------------------------------------------------------------------------------------------
Net Credit Income 136,079 125,799 266,713 231,901
- - --------------------------------------------------------------------------------------------------------------
Noninterest Income
Trust and investment advisory income 14,441 14,545 29,444 29,267
Service charges on deposit accounts 21,116 19,882 41,895 39,740
Bank card-related income 9,247 6,560 16,975 12,189
Other income 23,388 20,377 45,051 39,427
Securities gains (losses) (49) 1,511 (1,767) 2,622
- - --------------------------------------------------------------------------------------------------------------
Total noninterest income 68,143 62,875 131,598 123,245
- - --------------------------------------------------------------------------------------------------------------
Net Credit And Noninterest Income 204,222 188,674 398,311 355,146
- - --------------------------------------------------------------------------------------------------------------
Noninterest Expense
Personnel costs 75,992 64,223 150,789 127,481
Occupancy expense - net 10,061 9,421 20,855 18,387
Equipment expense 6,069 6,132 11,997 12,196
Other expense 48,611 60,771 91,102 105,567
- - --------------------------------------------------------------------------------------------------------------
Total noninterest expense 140,733 140,547 274,743 263,631
- - --------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 63,489 48,127 123,568 91,515
Income tax expense (note 11) 20,881 14,417 40,478 26,911
- - --------------------------------------------------------------------------------------------------------------
Net Income 42,608 33,710 83,090 64,604
Preferred dividend requirements - 619 - 1,238
- - --------------------------------------------------------------------------------------------------------------
Income Applicable To Common Shares $ 42,608 $ 33,091 $ 83,090 $ 63,366
==============================================================================================================
Earnings Per Share (note 12):
Primary $ 1.12 $ 0.88 $ 2.19 $ 1.71
Fully diluted 1.12 0.88 2.19 1.71
==============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Consolidated Statements Of Cash Flows
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
In thousands Six Months Ended June 30,
------------------------------
1994 1993
<S> <C> <C> <C>
Operating Net Income $ 83,090 $ 64,604
Activities Adjustments to reconcile net income to net cash provided by
operating activities:
Provisions for loan losses, foreclosed properties and
other losses 18,357 29,086
Depreciation and amortization of premises and equipment 16,113 15,688
Securities losses (gains) 1,767 (2,622)
Amortization of intangible assets 9,921 9,034
Deferred income tax expense 2,411 1,230
Loss on foreclosed properties 144 10,907
Gain on sale of mortgage servicing rights (9,332) (2,300)
Net decrease in trading account 4,888 22,698
Net decrease (increase) in loans held for sale 330,847 (7,226)
Net decrease (increase) in accrued interest receivable,
prepaid expenses and other assets 19,186 (90,857)
Net increase in accrued interest payable, accrued
expenses and other liabilities 30,954 39,605
Other, net 6,775 (2,644)
---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 515,121 87,203
- - ------------------------------------------------------------------------------------------------------------------
Investing Proceeds from maturities and calls of securities held to maturity 155,355 325,706
Activities Proceeds from maturities and calls of securities available for sale 220,437 30,330
Proceeds from sales of securities available for sale 1,478,024 368,708
Purchases of securities held to maturity (594,771) (719,242)
Purchases of securities available for sale (416,367) (443,242)
Net decrease (increase) in money market investments (556,500) 617,535
Principal collected on non-bank subsidiary loans 9,801 11,819
Loans originated by non-bank subsidiaries (118,295) (51,473)
Net decrease (increase) in other loans 2,421 (3,020)
Purchases of premises and equipment (18,462) (16,531)
Proceeds from sales of foreclosed properties 21,415 42,808
Proceeds from sale of mortgage servicing rights 15,268 3,175
Aquisitions of net assets of financial institutions 7,122 26,419
Other, net (5,510) (3,782)
---------------------------------------------------------------------------------------------------
Net cash provided by investing activities 199,938 189,210
- - ------------------------------------------------------------------------------------------------------------------
Financing Net increase (decrease) in demand, interest checking, money
Activities market and regular savings deposits (62,309) 89,416
Net decrease in short-term borrowings (495,949) (61,152)
Net decrease in certificates of deposit (257,837) (301,402)
Proceeds from issuance of long-term debt 158 -
Principal payments on long-term debt (2,787) (718)
Cash dividends paid (27,404) (20,464)
Common stock purchased and retired (18,912) (3,079)
Proceeds from the issuance of common stock 14,850 7,616
---------------------------------------------------------------------------------------------------
Net cash used by financing activities (850,190) (289,783)
- - ------------------------------------------------------------------------------------------------------------------
Cash and Decrease in cash and cash equivalents (135,131) (13,370)
Cash Cash and cash equivalents at beginning of year 716,652 754,583
Equivalents ---------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of quarter $ 581,521 $ 741,213
==================================================================================================================
</TABLE>
Cash and cash equivalents consist of cash and due from banks. See accompanying
notes to consolidated financial statements.
5
<PAGE>
Consolidated Statements Of Changes In Shareholders' Equity
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
Dollars in thousands Shareholders' Equity Shares of Common Stock
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
1994 1993 1994 1993
Balance, April 1 $1,082,439 $ 987,517 37,482,661 36,305,742
Net Income 42,608 33,710 - -
Cash dividends declared on:
Preferred stock, Series B - (619) - -
Common stock (15,020) (10,172) - -
Change in valuation allowance for
marketable
equity securities - 1,492 - -
Change in net unrealized loss on
securities
available for sale (note 15) (14,566) - - -
Common stock purchased and retired (9,108) (3,079) (200,000) (85,000)
Common stock issued:
For acquisition of financial
institutions 12,588 54,513 264,208 1,411,343
Upon conversion of debentures 108 2 11,670 216
For dividend reinvestment plan 2,901 2,170 63,223 59,482
Upon exercise of stock options
(including tax benefit of $577
in 1994 and $190 in 1993) 2,734 691 95,261 28,446
- - ---------------------------------------------------------------------------------------------------------
Balance, June 30 $1,104,684 $1,066,225 37,717,023 37,720,229
=========================================================================================================
Balance, January 1 $1,062,477 $ 958,905 37,515,671 36,156,605
Net Income 83,090 64,604 - -
Cash dividends declared on:
Preferred stock, Series B - (1,238) - -
Common stock (27,404) (19,226) - -
Change in valuation allowance for
marketable equity securities - 4,128 - -
Cumulative effect of change in
accounting for securities available
for sale (note 15) 32,209 - - -
Change in net unrealized gain on
securities available for sale (note 15) (53,040) - - -
Common stock purchased and retired (20,277) (3,079) (469,700) (85,000)
Common stock issued:
For acquisition of financial
institutions 12,588 54,513 264,208 1,411,343
Upon conversion of debentures 113 2 12,210 216
For dividend reinvestment plan 5,417 4,225 123,367 113,819
For directors' stock compensation plan 78 - 1,859 -
For thrift and profit sharing plan 4,993 - 115,770 -
Upon exercise of stock options
(including tax benefit of $868
in 1994 and $742 in 1993) 4,440 3,391 153,638 123,246
- - ---------------------------------------------------------------------------------------------------------
Balance, June 30 $1,104,684 $1,066,225 37,717,023 37,720,229
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
(1) General
The consolidated financial statements conform to generally accepted accounting
principles and to general practices within the banking industry. The
accompanying interim statements are unaudited; however, in the opinion of
management, all adjustments necessary for a fair presentation of the
consolidated financial statements, including adjustments related to completed
acquisitions, have been included. All adjustments are of a normal recurring
nature. Certain reclassifications have been made to the prior years'
consolidated financial statements to conform to the 1994 presentation. The
notes included herein should be read in conjunction with the notes to
consolidated financial statements included in the Corporation's 1993 Annual
Report and Form 10-K and in the Corporation's 1994 First Quarter Form 10-Q.
On May 14, 1994, Crestar acquired the deposits of Piedmont Federal Savings
Association, a Manassas, Virginia-based thrift institution which has been
operating under Resolution Trust Corporation (RTC) conservatorship. In
connection with this acquisition, Crestar paid a $10 million premium to the RTC
for approximately $150 million in deposits.
On June 10, 1994, Crestar completed the acquisition of Annapolis Bancorp,
Inc., a holding company for Annapolis Federal Savings Bank of Annapolis,
Maryland. Crestar acquired the stock of Annapolis Bancorp, Inc. for a purchase
price of approximately $15 million, which included 264,208 shares of Crestar
stock and $3 million in cash. The excess of the purchase price over the
estimated fair value of the tangible net assets acquired is classified as an
intangible asset in the consolidated balance sheet, and was approximately $20
million. Annapolis Bancorp, Inc. had total assets of approximately $300 million,
loans of approximately $210 million, and deposits of approximately $275 million
as of June 10, 1994.
The above acquisitions were accounted for as purchases and, accordingly, the
results of their operations are included in the accompanying consolidated
financial statements since their respective acquisition dates. Goodwill
recorded at the date of acquisition is being amortized over 15 years. The
results of operations of the above acquisitions for the periods prior to their
respective acquisition dates were not material to the results of operations of
Crestar.
(2) Securities Held To Maturity
The carrying values and approximate market values of securities held to
maturity at June 30 follow:
================================================================================
<TABLE>
<CAPTION>
In thousands 1994 1993
Carrying Market Carrying Market
Value Value Value Value
----------------------- -----------------------
<S> <C> <C> <C> <C>
U.S. Treasury and Federal
agencies $ 10,413 $ 10,221 $ 20,156 $ 20,525
Mortgage-backed
obligations of Federal
agencies 655,497 636,538 1,746,115 1,777,964
Other taxable securities 258,011 252,897 207,216 210,064
States and political
subdivisions 72,117 72,383 98,126 100,950
Common and preferred
stocks - - 21,718 21,718
- - ------------------------------------------------------------------------------
Total securities held
to maturity $ 996,038 $ 972,039 $2,093,331 $2,131,221
==============================================================================
</TABLE>
7
<PAGE>
(3) Securities Available For Sale
The carrying values and approximate market values of securities available for
sale at June 30 follow:
================================================================================
<TABLE>
<CAPTION>
In thousands 1994 1993
---------------------- -----------------------
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
U.S. Treasury and Federal
agencies $1,049,084 $1,033,644 $1,361,914 $1,400,706
Mortgage-backed
obligations of Federal
agencies 730,599 713,696 39,923 39,940
Other mortgage-backed
obligations 207,437 207,310 191,238 192,059
Other taxable securities 5,621 5,665 - -
Common and preferred
stocks 33,738 33,598 8,892 8,892
- - ------------------------------------------------------------------------------
Total securities
available for sale $2,026,479 $1,993,913 $1,601,967 $1,641,597
- - ------------------------------------------------------------------------------
</TABLE>
At June 30, 1994, gross unrealized gains were $10.5 million and gross
unrealized losses were $43.1 million for securities available for sale. The
majority of U.S. Treasury and Federal agency securities mature within one to
five years. The majority of mortgage-backed obligations have a stated maturity
of over ten years. See note 15 for a discussion of accounting changes
applicable to these securities.
(4) Money Market Investments
Money market investments at June 30 included:
================================================================================
<TABLE>
<CAPTION>
In thousands 1994 1993
<S> <C> <C>
Trading account securities $ 172 $ 19,513
Federal funds sold 414,690 4,836
Securities purchased under agreements to resell 105,000 88,000
Domestic time deposits 25,138 228
U.S. Treasury and other 698,975 435,472
- - --------------------------------------------------------------------------------
Total money market investments $1,243,975 $ 548,049
================================================================================
</TABLE>
(5) Nonperforming Assets
Nonperforming assets at June 30 were:
================================================================================
<TABLE>
<CAPTION>
In thousands 1994 1993
<S> <C> <C>
Nonaccrual loans $ 77,400 $117,529
Restructured loans - 238
- - --------------------------------------------------------------------------------
Total nonperforming loans 77,400 117,767
Foreclosed properties - net 25,000 45,033
- - --------------------------------------------------------------------------------
Total nonperforming assets $102,400 $162,800
================================================================================
</TABLE>
Non-cash additions to foreclosed properties were $3.6 million and $11.6 million
in the first six months of 1994 and 1993, respectively.
8
<PAGE>
(6) Allowance For Loan Losses
Transactions in the allowance for loan losses for the three months and six
months ended June 30 were:
================================================================================
<TABLE>
<CAPTION>
In thousands Three Months Six Months
1994 1993 1994 1993
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Beginning balance $ 226,577 $ 202,979 $ 210,958 $ 205,017
- - ---------------------------------------------------------------------------------------------
Charge-offs (15,936) (35,328) (34,689) (60,049)
Recoveries 7,096 20,324 15,807 24,507
- - ---------------------------------------------------------------------------------------------
Net charge-offs (8,840) (15,004) (18,882) (35,542)
Provision for loan losses 8,850 3,006 18,882 21,506
Allowance from acquisitions - net 79 22,000 15,708 22,000
- - ---------------------------------------------------------------------------------------------
Net increase 89 10,002 15,708 7,964
- - ---------------------------------------------------------------------------------------------
Ending balance $ 226,666 $ 212,981 $ 226,666 $ 212,981
=============================================================================================
</TABLE>
Allowance from acquisitions for the three month and six month periods ended
June 30, 1994 is net of a $4.2 million reduction in the allowance for loan
losses initially recorded upon the purchase of CFS Financial Corporation (CFS)
in May 1993. This reduction in the initial valuation of the acquired allowance
was based on subsequent and more detailed analysis of the creditworthiness of
the CFS loan portfolio as of the date of acquisition. The impact of this
reduction on the other values assigned to the assets acquired and liabilities
assumed in the CFS purchase was to decrease goodwill by $2.7 million and to
increase deferred income taxes payable by $1.5 million.
(7) Intangible Assets
Intangible assets at June 30 included:
================================================================================
<TABLE>
<CAPTION>
In thousands 1994 1993
<S> <C> <C>
Goodwill and deposit base intangibles $124,448 $ 81,767
Mortgage servicing rights 21,543 23,994
Other 621 731
- - ----------------------------------------------------------------------------------------------
Total intangible assets $146,612 $106,492
==============================================================================================
</TABLE>
(8) Allowance For Foreclosed Properties
Transactions in the allowance for losses on foreclosed properties for the three
months and six months ended June 30 were:
================================================================================
<TABLE>
<CAPTION>
In thousands Three Months Six Months
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Beginning balance $5,433 $ 9,564 $ 5,574 $10,264
- - -----------------------------------------------------------------------------------------------
Write-downs (390) (6,564) (645) (7,264)
Provision for foreclosed properties - 7,500 (1,302) 7,500
Allowance from acquisitions 4,123 2,046 5,539 2,046
- - -----------------------------------------------------------------------------------------------
Net increase 3,733 2,982 3,592 2,282
- - -----------------------------------------------------------------------------------------------
Ending balance $ 9,166 $ 12,546 $ 9,166 $ 12,546
===============================================================================================
</TABLE>
9
<PAGE>
(9) Short-Term Borrowings
Borrowings, exclusive of deposits, with maturities of less than one year at
June 30 were:
================================================================================
<TABLE>
<CAPTION>
In thousands 1994 1993
<S> <C> <C>
Federal funds purchased $ 411,017 $ 405,126
Securities sold under
repurchase agreements 785,452 1,027,795
Commercial paper 311 226
Notes payable 128,140 100,377
Term federal funds purchased - 50,000
U.S. Treasury demand notes - 3,029
Other 2,076 2,811
- - -------------------------------------------------------------------
Total short-term borrowings $1,326,996 $1,589,364
===================================================================
</TABLE>
The Corporation paid $149,431,000 and $150,947,000 in interest on deposits and
short-term borrowings in the first six months of 1994 and 1993, respectively.
(10) Long-Term Debt
Long-term debt at June 30 included:
===================================================================
<TABLE>
<CAPTION>
In thousands 1994 1993
<S> <C> <C>
81/4% Subordinated notes due 2002 $125,000 $125,000
85/8% Subordinated notes due 1998 49,960 49,950
7-101/2% Mortgage indebtedness maturing
through 2009 12,648 13,638
6-14% Capital lease obligations maturing
through 2006 2,979 2,378
41/8-61/4% Federal Home Loan Bank
obligations payable through 2008 11,115 -
43/4-91/2% Collateralized mortgage
obligation bonds maturing through 2019 20,717 -
5% Convertible subordinated debentures due
1994 - 134
52/5% Notes due 1995 - 50,309
73/4% Debentures due 1997 - 19,349
- - -------------------------------------------------------------------
Total long-term debt $222,419 $260,758
===================================================================
</TABLE>
The Corporation made payments of $9,134,000 and $9,009,000 in interest on
long-term debt in the first six months of 1994 and 1993, respectively. There
were no new capital lease agreements in the second quarter of 1994. At May 1,
1994, all remaining 5% convertible subordinated debentures outstanding were
converted into the common stock of Crestar at a conversion price of $9.25 per
share. During the second quarter of 1994, $8,414,000 of collateralized
mortgage obligation bonds were assumed through the acquisition of Annapolis
Bancorp, Inc.
10
<PAGE>
(11) Income Taxes
The current and deferred components of income tax expense allocated to
operations in the accompanying consolidated statements of income for the three
months and six months ended June 30 were:
================================================================================
<TABLE>
<CAPTION>
In thousands Three Months Six Months
---------------------- ------------------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Current:
Federal $20,940 $13,643 $37,185 $26,554
State and local (256) 480 882 (873)
- - ------------------------------------------------------------------------------------------
Total current tax expense 20,684 14,123 38,067 25,681
- - ------------------------------------------------------------------------------------------
Deferred:
Federal (542) 1,163 2,098 2,144
State and local 739 (869) 313 (914)
- - ------------------------------------------------------------------------------------------
Total deferred tax expense 197 294 2,411 1,230
- - ------------------------------------------------------------------------------------------
Total income tax expense $20,881 $14,417 $40,478 $26,911
==========================================================================================
</TABLE>
The differences between the amounts computed by applying the statutory federal
income tax rate to income before income taxes and the actual income tax expense
allocated to operations for the three months and six months ended June 30 were:
<TABLE>
<CAPTION>
In thousands Three Months Six Months
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Income before income taxes $63,489 $48,127 $123,568 $91,515
- - -------------------------------------------------------------------------------------------
Tax expense at statutory rate 22,221 16,363 43,249 31,115
- - -------------------------------------------------------------------------------------------
Increase (decrease) in taxes
resulting from:
Tax-exempt interest and
dividends (1,843) (2,099) (3,558) (4,331)
Nondeductible interest
expense 107 134 212 283
Amortization of goodwill 219 258 506 485
State income taxes 314 (256) 776 (192)
Adoption of new accounting
standard - - - (540)
Other - net (137) 17 (707) 91
- - -------------------------------------------------------------------------------------------
Total decrease in taxes (1,340) (1,946) (2,771) (4,204)
- - -------------------------------------------------------------------------------------------
Total income tax expense $20,881 $14,417 $40,478 $26,911
- - -------------------------------------------------------------------------------------------
Effective tax rate 32.9% 30.0% 32.8% 29.4%
===========================================================================================
</TABLE>
The Corporation made income tax payments of $37,572,000 and $28,037,000 during
the first six months of 1994 and 1993, respectively. At June 30, 1994, the
Corporation had a net deferred tax asset of $80,143,000. There was no
valuation allowance relating to the tax asset. Crestar has sufficient taxable
income in the available carryback periods and future taxable income from
reversing taxable differences to realize substantially all of its deferred tax
assets. Management believes, based on the Corporation's history of generating
significant earnings and expectations of future earnings, that it is more
likely than not that all recorded deferred tax assets will be realized.
11
<PAGE>
(12) Earnings Per Share
Average common and common equivalent shares used in the determination of
earnings per share for the three months and six months ended June 30 were:
================================================================================
<TABLE>
<CAPTION>
In thousands Three Months Six Months
--------------------- ---------------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Primary 37,930 37,440 37,901 37,061
Plus assumed conversion of debentures - 15 - 15
Other 1 24 3 33
- - -------------------------------------------------------------------------------------------------
Fully diluted 37,931 37,479 37,904 37,109
</TABLE>
================================================================================
Primary earnings per share are computed by dividing net income applicable to
common shares by the weighted average number of common shares outstanding
during the period, including average common equivalent shares attributable to
dilutive stock options. Fully diluted earnings per common share are computed
using average common shares, including the maximum dilutive effect of average
common equivalent shares, increased by the number of shares that would result
from assuming that the 5% convertible subordinated debentures were converted
into common stock at the beginning of the applicable period and using net
income increased by interest and amortization of debt issuance expense, net of
tax effect, relating to those debentures. Net income for 1993 is further
reduced by the dividends applicable to the Series B preferred stock. The
following table provides the net adjustment to net income:
================================================================================
<TABLE>
<CAPTION>
In thousands Three Months Six Months
--------------------- ---------------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Interest and amortization of debt issuance expense $ - 1 $ 2 3
Tax effect - - (1) (1)
Preferred dividends, Series B - (619) - (1,238)
- - ----------------------------------------------------------------------------------------------------------
Net adjustment to net income $ - (618) $ 1 (1,236)
==========================================================================================================
</TABLE>
In the first six months of 1994 and 1993, $113,000 and $2,000 of subordinated
debentures were converted into 12,210 and 216 shares of common stock,
respectively.
12
<PAGE>
(13) Condensed Crestar Financial Corporation (Parent) Information
The following shows the Parent's Condensed Balance Sheets at June 30:
================================================================================
<TABLE>
<CAPTION>
In thousands 1994 1993
<S> <C> <C>
Cash in banks $ 39,231 $ 36,414
Securities held to maturity 11,594 12,263
Securities available for sale 16,587 8,892
Money market investments 4,912 54,765
Securities purchased under
agreements to resell 98,908 88,000
Notes receivable from subsidiaries 181,849 176,000
Investments in subsidiaries:
Bank subsidiaries 1,099,412 1,017,576
Non-bank subsidiaries 8,336 7,286
Other assets 11,944 19,001
- - --------------------------------------------------------------------------------
Total Assets $1,472,773 $1,420,197
================================================================================
Commercial paper 311 226
Master notes 123,140 100,377
Securities sold to subsidiary under
repurchase agreements 4,348 2,795
Other liabilities 65,309 56,141
Long-term debt 174,981 194,433
Total shareholders' equity 1,104,684 1,066,225
- - --------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $1,472,773 $1,420,197
================================================================================
</TABLE>
The Parent's Condensed Statements of Income for the three months and six
months ended June 30 were:
<TABLE>
<CAPTION>
In thousands Three Months Six Months
1994 1993 1994 1993
---------------------- ----------------------
<S> <C> <C> <C> <C>
Cash dividends from bank subsidiaries $23,492 $11,151 $37,110 $21,214
Interest from subsidiaries 3,628 3,652 7,279 7,278
Interest on securities held to maturity and
available for sale 245 559 442 1,103
Income on money market investments 52 412 271 623
Interest on securities purchased under
agreements to resell 1,108 701 1,911 1,727
Other income 124 41 133 41
Securities losses - (1,494) - (1,494)
- - ------------------------------------------------------------------------------------------------------------
Total income 28,649 15,022 47,146 30,492
- - ------------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 973 644 1,657 1,331
Interest on long-term debt 3,657 4,034 7,317 8,070
Other expense 1,421 433 1,542 602
- - ------------------------------------------------------------------------------------------------------------
Total expense 6,051 5,111 10,516 10,003
- - ------------------------------------------------------------------------------------------------------------
Income before income taxes and equity in
undistributed net income of subsidiaries 22,598 9,911 36,630 20,489
Income tax benefit (451) (691) (366) (1,438)
- - ------------------------------------------------------------------------------------------------------------
Income before equity in undistributed net
income of subsidiaries 23,049 10,602 36,996 21,927
- - ------------------------------------------------------------------------------------------------------------
Equity in undistributed net income of
subsidiaries 19,559 23,108 46,094 42,677
- - ------------------------------------------------------------------------------------------------------------
Net Income $ 42,608 $ 33,710 $ 83,090 $ 64,604
============================================================================================================
</TABLE>
13
<PAGE>
(14) Commitments and Contingencies
In the normal course of business, there are outstanding commitments and
contingent liabilities and other financial instruments that are not reflected
in the accompanying consolidated financial statements. These include
commitments to extend credit, put options, standby letters of credit, interest
rate caps, floors and collars, interest rate swaps, and forward contracts. No
material losses are expected to result from these transactions.
Commercial lines of credit are established for a potential borrower as an
indication of the aggregate amount of outstanding loans that the banks are
willing to extend. Sometimes these lines of credit are supported by balances
left on deposit, investment securities, real estate or inventory. Loan
advances made under such lines usually do not extend beyond the borrower's
fiscal year. Such advances are normally given for working capital purposes and
require repayment within twelve months.
Formal long-term commitments are made under legal and binding agreements for
which the borrower pays a commitment fee. These agreements typically contain
clauses that permit cancellation of the commitment in the event of credit
deterioration of the borrower.
Crestar's outstanding standby letters of credit amounted to approximately
$411.5 million at June 30, 1994 and $413.3 million at June 30, 1993. At June
30, 1994, approximately $10.3 million of these standby letters of credit were
participated to other financial institutions.
The Corporation services mortgage loans other than those included in the
accompanying consolidated financial statements and, in some cases, accepts a
recourse liability on the serviced loans. At June 30, 1994, Crestar serviced a
total of $819.8 million of loans for which it had accepted a recourse
liability. Of this amount, approximately $489.0 million was insured by
agencies of the Federal government or private insurance companies. In
addition, at June 30, 1994, Crestar had forward contracts totaling $422.9
million outstanding as hedges of lending commitments.
As a financial institution, Crestar entails a degree of interest rate risk
as a provider of banking services to its customers. This risk can be reduced
through derivative interest rate contracts, such as interest rate swaps, caps
and floors. Changes in the fair value of such derivatives are generally offset
by changes in the implied fair value of the underlying hedged asset or
liability. As hedges against interest rate risk at June 30, 1994, Crestar was
participating in interest rate (fixed receive) swaps having a notional value of
$1.57 billion. Of these interest rate swaps, $1.38 billion were used to convert
certain variable rate commercial and real estate loans to fixed rates, and $150
million were used to convert variable rate securities to fixed rates, in order
to make their interest sensitivity more neutral. An additional $35 million in
interest rate swaps were used to convert specifically identified time deposits
to variable rates in order to lock in a spread on the variable rate assets which
they fund. Notional balances of $876.4 million of the above swaps were indexed
amortizing swaps, whose notional value amortizes more slowly as rates rise.
Unrealized gains and unrealized losses on interest rate swap contracts
utilized as hedges were $4.9 million and $57.3 million, respectively, as of June
30, 1994.
Crestar also had a notional amount outstanding of $200 million of interest
rate floor agreements on June 30, 1994 to minimize interest rate risk associated
with variable rate assets. Unrealized losses on these floor agreements
approximated $200,000 as of June 30, 1994.
The notional amount of these over-the-counter traded interest rate swaps and
floors does not represent Crestar's credit exposure, which the Corporation views
as a combination of current replacement cost plus an amount for additional
market movement. At June 30, 1994, such estimated credit exposure was $38.4
million. Three counterparties constituted 26%, 13% and 11% of the estimated
credit exposure at June 30, 1994; no other counterparties represented more than
10% of the estimated credit exposure at June 30, 1994.
The average expected maturity at June 30, 1994 was 1.5 years for interest
rate swaps and 0.6 years for interest rate floors used by Crestar as hedge
instruments. The average fixed rate for these swaps was 5.93%. The interest rate
floors used by Crestar as hedges against interest rate risk are tied to the
London Inter-Bank Offered Rate (LIBOR). The average strike rate at June 30, 1994
for these interest rate floors was 5.50%.
Crestar serves as a financial intermediary in interest rate cap, interest
rate floor and interest rate collar agreements, and at June 30, 1994 had
aggregate notional amounts outstanding of $63.1 million in offsetting interest
rate cap agreements, $50.0 million in offsetting interest rate floor agreements,
and $80.8 million in offsetting interest rate collar agreements.
Under the terms of the January 11, 1994 purchase agreement, Crestar may pay
the former owners of Mortgage Capital Corporation an additional $2.4 million
depending on the future performance of Mortgage Capital Corporation's operations
over the next five years.
Certain litigation is pending against Crestar. Management, after reviewing
this litigation with legal counsel, is of the opinion that these matters, when
resolved, will not have a material effect on the accompanying consolidated
financial statements.
14
<PAGE>
(15) New Accounting Standards
Effective January 1, 1994, Crestar adopted Statement of Financial Accounting
Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and
Equity Securities." In accordance with SFAS 115, securities are classified as
either securities held to maturity, securities available for sale or trading
account securities. Securities held to maturity are carried at amortized cost,
as the Corporation has the ability and positive intent to hold these securities
to maturity. Trading account securities are carried at fair value as they are
intended to be sold in the near term: trading securities are classified as
money market investments on the Corporation's Consolidated Balance Sheets.
Securities available for sale are carried at fair value and represent
securities not classified as held to maturity or as trading account securities.
With the adoption of SFAS 115, unrealized holding gains and losses on
securities available for sale are excluded from the Consolidated Statements of
Income and reported, net of tax, as a separate component of shareholders'
equity. On January 1, 1994, securities having an amortized cost of $2.932
billion, and a fair value of $2.983 billion, were classified as securities
available for sale. The initial effect of adoption of SFAS 115 was an increase
in shareholders' equity of $32.2 million, which was the amount, net of tax, by
which the fair value of securities available for sale exceeded the amortized
cost of such securities on January 1, 1994.
At June 30, 1994, on an after-tax basis, the amortized cost of securities
available for sale exceeded the fair value of such securities by $20.8 million.
The net unrealized gain or loss of securities available for sale, which is
recorded as a component of shareholders' equity, will continue to be subject to
change in future periods due to fluctuations in market value, acquisition
activities, and sales, purchases, maturities and calls of securities classified
as available for sale.
In accordance with SFAS 115, the Corporation's consolidated financial
statements for periods prior to January 1, 1994 have not been retroactively
changed to conform to current securities classifications. Prior to January 1,
1994, investment securities which management intended to sell as a part of its
asset/liability management strategy, or that may have been sold in response to
changes in interest rates, prepayment risk or other similar factors, were
classified as securities held for sale, and were stated at the lower of
aggregate amortized cost or market value. All other investment securities were
accounted for in a manner similar to securities held to maturity or trading
account securities.
Statement of Financial Accounting Standards No. 112 (SFAS 112), "Employers'
Accounting for Postemployment Benefits," was adopted by Crestar on January 1,
1994. Under SFAS 112, benefits provided to inactive or former employees before
retirement are accrued during the period of active employment, rather than
being expensed as paid. For Crestar, such benefits consist principally of
short-term disability benefits. Adoption of SFAS 112 resulted in a pre-tax
charge to employee benefit expense of $1.8 million in the first quarter of
1994. Postemployment benefits expense for periods prior to January 1, 1994 has
not been restated.
15
<PAGE>
Financial Commentary
Crestar Financial Corporation And Subsidiaries
Overview
(Tables 1, 2 and 14)
Crestar Financial Corporation (Crestar) reported record earnings of $42.6
million for the quarter ended June 30, 1994, an increase of 26% from the $33.7
million earned in second quarter 1993. For the first six months, earnings were
$83.1 million in 1994, an increase of 29% from the $64.6 million in 1993.
These increases reflected the continued positive effects of growth in net
interest income and noninterest income and continuing improvement in credit
quality. Earnings per share were $1.12 for the second quarter of 1994 compared
with $.88 in 1993. For the first six months of the year, earnings per share
were $2.19 for 1994, an increase of 28% from the $1.71 per share recorded in
the first six months of 1993. The predominant items affecting the change in
earnings per share are given in Table 2. Each applicable item is net of
applicable federal income taxes.
Mergers and Acquisitions
Two acquisitions were completed during the second quarter of 1994. On June 10,
Crestar completed its previously announced acquisition of Annapolis Bancorp,
Inc. (Annapolis), the holding company for Annapolis Federal Savings Bank, a
$300 million-asset thrift institution based in Annapolis, Maryland. Annapolis
shareholders received, in a combination of Crestar stock and cash, a total of
$15 million. The Annapolis acquisition included approximately $275 million in
deposits, $210 million in loans and nine branch offices.
On May 14, Crestar acquired the deposits of Piedmont Federal Savings
Association, a Manassas, Virginia-based thrift institution which had been
operating under Resolution Trust Corporation (RTC) conservatorship since
October, 1992. Crestar paid a $10 million premium to the RTC for Piedmont's
$150 million in deposits.
The above acquisitions have been accounted for under the purchase method of
accounting whereby the purchase price has been allocated to the underlying
assets acquired and liabilities assumed based on their respective fair values
at the date of acquisition. In the aggregate, acquisitions completed during
the first six months of the year are expected to contribute positively to
earnings per share for 1994. Financial statement note 1 contains additional
information concerning these acquisitions.
Profitability Measures and Capital Resources
(Table 1)
Increased earnings in both the second quarter and the first six months of 1994
resulted in improvements in key profitability measures over 1993. Return on
average assets was 1.25% for the second quarter and 1.23% for the first six
months of 1994, compared to 1.09% and 1.05%, respectively, for 1993. Return on
average equity and return on average common equity were both 15.79% for the
second quarter, up from 13.24% and 13.60%, respectively, for the second quarter
of 1993. Return on average equity and return on average common equity for the
first six months were both 15.31%, up from 13.00% and 13.36%, respectively, for
the first six months of 1993.
Average equity to assets of 7.90% for second quarter 1994 decreased 32 basis
points from 8.22% in second quarter 1993, and average equity to assets of 8.05%
for the first six months was down 5 basis points from 8.10% in 1993, reflecting
the net impact of acquisitions and Crestar's common stock repurchase program.
Period-end equity to assets of 7.71% at June 30, 1994 was 34 basis points below
the 8.05% in 1993, also reflecting an increase in period-end assets as a result
of the acquisitions completed.
Crestar's consolidated Tier 1 risk-adjusted capital ratio was 9.3% and total
risk-based capital was 12.0% at June 30, 1994, well above the required minimums
of 4.0% and 8.0%, respectively. The Tier 1 leverage ratio of 7.5% at June 30,
1994 also was well above the regulatory minimum of 3%. Crestar's tangible
leverage ratio, defined as total equity less all intangibles divided by total
assets less all intangibles and utilized by the Federal Reserve Board in
evaluating proposals for expansion or acquisitions, was 6.8% at June 30, 1994.
Each of Crestar's three subsidiary banks continued to be "well capitalized" as
of June 30, 1994, the highest level of capitalization defined by the Federal
Deposit Insurance Corporation for purposes of determining deposit insurance
rates.
Net Interest Margin and Net Interest Income
(Tables 3 and 15)
Crestar's second quarter 1994 net interest margin of 4.76% improved three basis
points from 4.73% in the second quarter of 1993. This increase reflects
favorable changes in the composition of balance sheet earning assets, which
offset adverse rate movements. Changes in the earning asset mix increased the
second quarter 1994 net interest margin by approximately 17 basis points,
fueled by growth in loans. Average bank card loans increased $423 million, or
65%, to $1.1 billion in second quarter 1994. Average real estate loans were up
42%, or $734 million, from second quarter 1993 balances. Also, average
instalment loans grew 20 percent during this period. As a percentage of total
earning assets, loans increased from 61% in second quarter 1993 to 67% for
second quarter 1994. On the funding side, the proportion of lower-cost sources
increased due to an increase in average net free sources, primarily net demand
deposits. Average total deposits for second quarter 1994 increased $1.5
billion to $11.1 billion, a 16% increase over second quarter 1993 balances.
Average short-term borrowings were down 25% from second quarter 1993 balances,
reflecting the growth in deposits. These positive changes to Crestar's funding
mix had a positive impact of four basis points on second quarter 1994 net
interest margin when compared to second quarter 1993.
16
<PAGE>
Positive changes in balance sheet mix were dampened slightly by narrower
interest rate spreads during second quarter 1994. The yield on average loans
decreased 20 basis points from second quarter 1993, with declines noted in the
instalment, bank card and real estate loan portfolios. The average rate paid
on savings and time deposits decreased 12 basis points during this time period,
falling from 3.22% in second quarter 1993 to 3.10% in second quarter 1994. In
total, narrower interest rate spreads depressed second quarter 1994 net
interest margin, versus second quarter 1993, by 10 basis points.
Decreased levels of nonperforming assets in the second quarter of 1994 had
a favorable impact on the net interest margin of approximately four basis
points, which was offset by an 11 basis point decline in the favorable margin
benefit arising from off-balance sheet hedges.
The extent to which Crestar will be able to maintain the net interest
margin is significantly influenced by the economic environment in our markets
and the economic policy of the Federal Reserve Board, in addition to competitive
market conditions for both loans and deposits.
As a result of the increase in the net interest margin and an 11% increase
in average earning assets, reported net interest income for second quarter 1994
increased 13% over 1993, and tax-equivalent net interest income increased 12%.
For the first six months, tax equivalent net interest income increased 12% over
1993 as a result of a six basis point increase in net interest margin and a 10%
increase in average earning assets. Factors contributing to the increased year-
to-date margin mirror those previously discussed. Positive changes to both the
earning assets and funding mix for the year-to-date period had a favorable
impact of 29 basis points, while declining earning asset yields contributed to a
19 basis point negative impact from narrower interest rate spreads. Reduced non-
performing assets added a five basis point favorable impact, while declining
levels of favorable off-balance sheet hedge transactions had a negative impact
of nine basis points.
Risk Exposures and Credit Quality
(Tables 4 - 10)
In addition to other loan categories, Crestar closely manages its portfolio of
loans to real estate developers and investors (REDI). The REDI portfolio was
the primary source of weaker credit quality for the recessionary period from
1990 into 1993. As detailed in Table 4, REDI outstandings were $1.1 billion or
13% of total loans at June 30, 1994 compared with $1.2 billion or 17% of total
loans at June 30, 1993. The relative concentration level of REDI outstandings
to total loans continues to decrease as loan growth occurs, despite additions
to the REDI loan portfolio arising from acquisitions of financial institutions.
At June 30, 1994, nonperforming loans comprised 3.70% of the total REDI loan
portfolio; the comparable ratio as of June 30, 1993 was 5.56%. Table 5 shows
the property type and geographic diversification of the REDI portfolio.
Continued improvement in credit quality was evident in second quarter 1994
levels of provision for loan losses, charge-offs and nonperforming assets.
While the provision for loan losses of $8.9 million for second quarter 1994 was
up from the $3.0 million provision for second quarter 1993, six month
year-to-date provision expense was down 12%, from $21.5 million in 1993 to
$18.9 million in 1994. Net charge-offs of $8.8 million for second quarter 1994
declined 41% from 1993. For the first six months, net charge-offs were down
47% to $18.9 million. Crestar's REDI loan portfolio experienced net recoveries
of $0.3 million for second quarter 1994, reflecting improvement in the credit
quality of the portfolio as well as an increasing rate of charge-off
recoveries. Net charge-offs for non-REDI loans were $9.1 million, resulting in
total net charge-offs for all loans in the second quarter of $8.8 million. In
the second quarter 1993, REDI net charge-offs were $6.8 million, or 2.4% of
REDI average loans. Current expectations are that net charge-offs for the full
year of 1994 will be less than in 1993.
The allowance for loan losses was $227 million at June 30, 1994,
representing 2.64% of period-end loans, 221% of nonperforming assets and 293% of
nonperforming loans. Based on portfolio characteristics and market conditions,
management considers the level of the allowance adequate.
Total nonperforming assets of $102 million at June 30, 1994 declined 37%
from the $163 million reported in 1993. Nonperforming assets at June 30, 1994
included $9 million which resulted from the June 1994 acquisition of Annapolis
Bancorp, Inc. During the first six months of 1994, nonperforming assets of
approximately $35 million were acquired through merger activity. Tables 9 and 10
provide details of how nonperforming loans and foreclosed properties have
changed on a quarterly basis since second quarter 1993. Barring an unexpected
deterioration in the economy and in the Corporation's real estate markets, total
nonperforming assets are expected to decrease in 1994, exclusive of additions
that may arise from any future acquisitions.
Potential problem loans consist of loans that are currently performing in
accordance with contractual terms but for which potential operating or
financial concerns have caused management to have serious doubts regarding the
ability of such obligors to continue to comply with present repayment terms.
At June 30, 1994, potential problem loans, not included in Table 8, amounted to
approximately $168 million compared with $223 million at June 30, 1993 and $205
million at December 31, 1993.
Noninterest Income and Expense
(Table 11)
Noninterest income totaled $68.1 million in second quarter 1994, a $5.3 million
or 8% increase over second quarter 1993. For the first six months of 1994,
noninterest income of $131.6 million increased 7% over 1993 results. Excluding
securities gains (losses), noninterest income increased 11% in the second
quarter of 1994, and also 11% in the first six
17
<PAGE>
months of 1994, when compared to prior year results. Both the quarter and
year-to-date increases reflect growth in bank card-related fee income, mortgage
servicing income and servicing sales, and service charges on deposit accounts,
partially offset by declines in trading account activities and mortgage
origination volume.
Noninterest expense for the second quarter was basically flat when compared
to second quarter 1993 results, increasing only $186,000. For the six months
ended June 30, noninterest expense for 1994 was up 4% in comparison to 1993.
These results stem in part to a dramatic decline in Crestar's foreclosed
properties expense in the current year, reflecting an improved credit
environment in Crestar's market area. Excluding foreclosed properties expense,
noninterest expense increased 15% in second quarter 1994 and 16% in the first
six months of 1994, largely due to acquisition expenses and costs incurred in
servicing and fee-based businesses such as mortgage, bank card, investment
banking and sales, and trust and investment advisory services. Additional
expenses arising from the six acquisitions completed in the first half of 1994
were approximately $10.4 million, or approximately 28% of the six months year-
to-date 1994 increase, exclusive of foreclosed property expenses, of $37.6
million. Expense increases in the mortgage, bank card, and trust and investment
advisory groups amounted to approximately $11.9 million year-to-date, as Crestar
continues its emphasis on growing sources of noninterest income. Employee
benefits expense increased $4.4 million for the quarter and $7.7 million year-
to-date, primarily due to the aforementioned acquisition activity, adoption of
Statement on Financial Accounting Standards No. 112 (postemployment benefits),
and to employee benefits that are tied to earnings.
Foreclosed properties expense for second quarter 1994 and the first six
months declined $18.3 million or 95% and $26.5 million or 97%, respectively,
from 1993. Foreclosed properties, net of reserves, were $25.0 million at June
30, 1994, versus $45.0 million at June 30, 1993.
The effective tax rate for second quarter 1994 and the first six months was
32.9% and 32.8%, respectively, compared to 30.0% and 29.4% for 1993. Both the
quarterly and year-to-date increase in the effective tax rate is attributed to
an increase in the federal corporate income tax rate from 34% to 35% enacted in
third quarter 1993, the adoption of Statement of Financial Accounting Standards
Board No. 109, "Accounting for Income Taxes", which resulted in a reduction of
income tax expense of $540 thousand in first quarter 1993, and reduced
proportions of tax-exempt interest and dividends. Financial statement note 11
contains additional information concerning income taxes.
Financial Condition
(Table 12)
Crestar's assets totaled $14.3 billion at June 30, 1994, up 8% from $13.3
billion at December 31, 1993 primarily due to acquisitions completed in the
first six months of 1994. Loans net of unearned income at June 30, 1994
increased $1.3 billion or 18%, reflecting growth from a combination of
acquisitions and internally generated lending. Total deposits increased $1.2
billion or 12% over December 31, 1993 balances, reflecting the impact of
Crestar's acquisitions during the first six months of 1994. Average loan
balances for second quarter 1994 increased $1.5 billion, or 22%, over second
quarter 1993 balances. Of this increase, approximately $1.0 billion was
attributable to acquisitions completed during 1994. Similarly, average
deposits for second quarter 1994 increased $1.5 billion, or 16%, over the same
period of 1993. Acquisitions during 1994 contributed approximately $1.1
billion to this average total deposit growth.
With respect to the securities held to maturity portfolio, carrying value
exceeded the market value at June 30, 1994 by $24.0 million, consisting of $4.1
million in unrealized gains and $28.1 million in unrealized losses. At June
30, 1994, the amortized cost of securities available for sale exceeded the fair
value of such securities by $32.6 million, consisting of $10.5 million in
unrealized gains and $43.1 million in unrealized losses. On January 1, 1994,
Crestar adopted Statement of Financial Accounting Standards Board No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115).
Upon adoption of SFAS 115, certain investment securities totaling $1.2 billion
were reclassified from investment securities to securities available for sale.
Shareholders' equity at June 30, 1994 reflects a $20.8 million reduction
for the excess of amortized cost of securities available for sale, net of tax,
over the fair value at quarter-end as prescribed by SFAS 115. The net unrealized
gain or loss of securities available for sale, which is recorded as a component
of shareholders' equity, will continue to be subject to change in future periods
due to fluctuations in market value, acquisition activities, and sales,
purchases, maturities and calls of securities classified as available for sale.
Crestar purchased and retired 200,000 shares of common stock at an average
price of $45.54 per share during second quarter 1994, to meet the needs of
employee benefit plans, dividend reinvestment plans, and for shares issued for
the acquisition of Annapolis Bancorp, Inc. For the six month period ended June
30, 1994, 469,700 shares of common stock have been purchased and retired, at an
average price of $43.17. In connection with the June 1994 acquisition of
Annapolis Bancorp, Inc., 264,208 shares of common stock were issued. Effective
with the common stock dividend paid on May 20, 1994, Crestar increased the
quarterly dividend rate to $.40 per share, from the previous quarterly rate of
$.33 per share.
Debt ratings are presented in Table 12. In April 1994, Moody's raised its
ratings on Crestar's subordinated notes from Baa2 to Baa1. In its
announcement, Moody's cited Crestar's rising core profitability trend and
decreased credit expenses as reasons for the ratings upgrade.
18
<PAGE>
Liquidity and Interest Sensitivity
(Table 13)
Bank liquidity is a measure of the ability to generate and maintain sufficient
cash flows to fund operations and to meet financial obligations to depositors
and borrowers promptly and in a cost-effective manner.
Interest sensitivity refers to the volatility of net interest income as a
result of changes in interest rates and is measured in several ways. Crestar's
goal is to limit interest rate exposure to prudent levels as determined by the
Asset/Liability Management Committee (ALCO). The primary tool used by ALCO is
net interest income simulations. A two-year net interest income forecast based
on a "most likely" interest rate forecast is prepared regularly, as are net
interest income forecasts based on alternative high and low interest rate
scenarios. The expected dynamics of the balance sheet, including shifts in
loans and deposits, are included in simulations. The high- and low-rate
forecasts are compared to the "most likely" scenarios.
A second interest sensitivity tool is the quantification of market value
changes for all assets and liabilities given an increase or decrease in
interest rates. This approach to interest rate risk provides a longer term
view of the risk, capturing all expected future cash flows. Assets and
liabilities with option characteristics are valued based on numerous interest
rate path valuations. The banking industry, including regulators, is moving
toward a market value type of interest sensitivity assessment. Crestar has
been developing this tool and will incorporate it as another component of
interest rate risk management to supplement the results achieved through
simulation.
Another interest rate risk tool used by Crestar is the interest rate "gap,"
or mismatch in repricing between interest-sensitive assets and liabilities,
which provides a general indication of interest sensitivity at a specific point
in time. A gap schedule is shown in Table 13, and reflects the earlier of the
maturity or repricing date for various assets and liabilities at June 30, 1994.
Financial statement note 14 contains additional information about certain off-
balance sheet arrangements that may affect future net interest income and
interest rate sensitivity. On a cumulative six-month basis, Crestar had a
liability sensitive "static gap" at June 30, 1994 with $3.2 billion excess of
interest-sensitive sources of funds over uses of funds. In addition to the
traditional "static gap" presentation, the table also presents interest
sensitivity on an adjusted basis. The first of these adjustments is made through
the use of beta factors, which are based on a ratio of actual changes in
consumer deposit rates to changes in the prime rate during interest rate cycles
for the last several years. Essentially, the beta factors recognize that certain
consumer deposit rates are less interest-sensitive than market-based rates such
as commercial paper. In addition to a beta adjustment, the table also
incorporates an adjustment to reflect the sensitivity of much of the
Corporation's commercial demand deposit balances to the level of interest rates.
On a cumulative six-month basis, Crestar had a liability sensitive "adjusted
gap" at June 30, 1994, with $723 million excess of interest-sensitive sources of
funds over uses of funds. The static gap and adjusted gap do not include $200
million in interest rate floors which Crestar has added to offset the effect
that falling interest rates would have on $200 million of variable rate loans.
As a financial institution, Crestar incurs a degree of interest rate risk
as a provider of banking services to its customers. This risk can be reduced
through derivative interest rate contracts, such as interest rate swaps, caps
and floors. The majority of Crestar's notional value of outstanding derivative
instruments at June 30, 1994 are utilized to convert certain variable rate
assets to fixed rates in order to make their interest sensitivity more neutral.
Footnote 14 of the financial statements provides additional information
regarding Crestar's outstanding derivative contracts as of June 30, 1994,
including notional balances and fair value information.
The notional amount of derivative contracts does not represent Crestar's
credit exposure, which the Corporation views as a combination of current
replacement cost plus an amount for additional market movement. Crestar has
established policies governing derivative activities, including the credit
quality of counterparties. There were no past due amounts or reserves for
possible derivative credit losses at June 30, 1994, nor has Crestar ever
experienced any charge-offs related to derivative transactions. No interest rate
swaps, floors or caps used as hedges against interest rate risk were sold or
terminated prior to maturity during the past 24 months; at June 30, 1994 there
were no deferred gains or losses arising from termination of hedged transactions
prior to maturity.
Other New Accounting Standards
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan," (SFAS 114) will become effective for fiscal years
beginning after December 15, 1994. This accounting standard requires that
impaired loans within the scope of the statement be measured and reported on
the basis of the present value of expected cash flows discounted at the loan's
effective interest rate. Crestar currently believes that the future impact on
results of operations and financial position of adopting SFAS 114 will be
immaterial.
Financial statement note 15 contains additional information concerning
adoption of new accounting standards.
19
<PAGE>
Table 1 Financial Highlights
<TABLE>
<CAPTION>
Dollars in millions, except per share data Three Months Six Months
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
% %
For the Period Ended June 30 1994 1993 Change 1994 1993 Change
Net Income $ 42.6 $ 33.7 26 $ 83.1 $ 64.6 29
Income Applicable to Common Shares 42.6 33.1 29 83.1 63.4 31
Dividends Declared on Common Stock 15.0 10.2 47 27.4 19.2 43
Primary Earnings Per Share:
Net Income $ 1.12 $ 0.88 27 $ 2.19 $ 1.71 28
Average Shares Outstanding (000s) 37,930 37,440 1 37,901 37,061 2
Dividends Declared Per Share:
Common Stock $ 0.40 $ 0.28 43 $ 0.73 $ 0.53 38
Preferred Stock, Series B - 0.69 (100) - 1.38 (100)
==================================================================================================================================
Key Ratios
Return on Average Assets 1.25% 1.09% 1.23% 1.05%
Return on Average Total Equity 15.79 13.24 15.31 13.00
Return on Average Common Equity 15.79 13.60 15.31 13.36
Average Equity to Average Assets 7.90 8.22 8.05 8.10
Net Interest Margin 4.76 4.73 4.77 4.71
At June 30
Equity to Assets 7.71% 8.05%
Risk Adjusted Capital Ratios:
Tier I 9.3 10.5
Total 12.0 13.6
Book Value Per Share $ 29.29 $ 27.04
===================================================================================================================================
</TABLE>
Table 2 Analysis Of Primary Earnings Per Share
<TABLE>
<CAPTION>
2nd Qtr. 1994 2nd Qtr. 1994
vs. vs.
2nd Qtr. 1993 1st Qtr. 1994
------------- -------------
<S> <C> <C>
Earnings Per Share - prior period $ .88 $ 1.07
- - ------------------------------------------------------------------------------------------------------------------------------------
Interest income 0.39 0.19
Interest expense (0.13) (0.12)
Provision for loan losses (0.10) 0.02
Securities gains or losses (0.03) 0.03
Other noninterest income 0.12 0.05
Foreclosed properties expense 0.31 (0.01)
Other noninterest expense (0.32) (0.10)
Income taxes (0.01) (0.01)
Preferred dividends 0.02 -
Increased shares outstanding (0.01) -
- - ------------------------------------------------------------------------------------------------------------------------------------
Net increase 0.24 0.05
- - ------------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share - current period $ 1.12 $ 1.12
====================================================================================================================================
</TABLE>
20
<PAGE>
Table 3 Average Balances, Net Interest Income And Rate/Volume Analysis/1/
<TABLE>
<CAPTION>
Dollars in thousands
2nd Qtr. 1st Qtr.
- - ------------------------------------ Average
Average Balance Increase Balance
1994 1993 (Decrease) 1994
- - ---------- ---------- ---------- ----------
<C> <C> <C> <C> <S>
$ $ % $
2,564,103 2,480,790 3 2,476,846 Commercial loans
217,577 268,852 (19) 224,653 Tax-exempt loans
1,700,077 1,415,055 20 1,625,825 Instalment loans
1,075,560 652,415 65 966,242 Bank card loans
2,464,921 1,730,574 42 2,050,782 Real estate loans
225,441 229,252 (2) 220,881 Construction loans
379 42 200+ 387 Foreign loans
- - ----------------------------------------------------------------------------------------------------
8,248,058 6,776,980 22 7,565,616 Total loans - net of unearned income/2/
- - ----------------------------------------------------------------------------------------------------
953,249 1,793,327 (47) 528,507 Securities held to maturity
- - ----------------------------------------------------------------------------------------------------
2,129,177 1,527,754 39 2,948,914 Securities available for sale
- - ----------------------------------------------------------------------------------------------------
680,182 693,698 (2) 468,907 Money market investments
- - ----------------------------------------------------------------------------------------------------
308,872 297,276 4 467,598 Mortgage loans held for sale
- - ----------------------------------------------------------------------------------------------------
12,319,538 11,089,035 11 11,979,542 Total earning assets
====================================================================================================
1,893,459 1,590,811 19 1,817,810 Interest checking deposits
2,409,660 2,288,838 5 2,301,992 Money market deposit accounts
1,446,340 1,064,632 36 1,316,111 Regular savings deposits
690,701 579,141 19 582,295 Money market certificates
2,572,655 2,130,438 21 2,303,715 Other domestic time deposits
- - ----------------------------------------------------------------------------------------------------
9,012,815 7,653,860 18 8,321,923 Total interest-bearing core deposits
- - ----------------------------------------------------------------------------------------------------
1,061,155 1,385,117 (23) 1,474,084 Purchased liabilities
220,094 236,872 (7) 203,376 Long-term debt
- - ----------------------------------------------------------------------------------------------------
10,294,064 9,275,849 11 9,999,383 Total interest-bearing liabilities
2,025,474 1,813,186 12 1,980,159 Other sources - net
- - ----------------------------------------------------------------------------------------------------
12,319,538 11,089,035 11 11,979,542 Total sources of funds
- - ----------------------------------------------------------------------------------------------------
Net Interest Income
====================================================================================================
</TABLE>
/1/Tax-equivalent basis
/2/Nonaccrual loans are included in the average loan balances and income on such
loans is recognized on a cash basis
/3/Includes tax-equivalent loan fees of $2.1 million and $2.3 million for the
second quarter of 1994 and 1993, respectively, and $2.2 million for the
first quarter of 1994
21
<PAGE>
<TABLE>
<CAPTION>
2nd Qtr.
- - ----------------------------------------------
1994 vs. 1993 2nd Qtr. 1994 vs. 1st Qtr. 1994
--------------------------- 1st Qtr. -------------------------------
Income Expense/3/ Change due to/4/ Income/ Change due to/4/
- - ----------------- Increase ----------------- Expense/3/ Increase -----------------
1994 1993 (Decrease) Rate/5/ Volume 1994 (Decrease) Rate/5/ Volume
- - ------- ------ ---------- ------- ------ -------- ---------- -------- ------
$ $ $ $ $ $ $ $ $
<C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
48,983 46,730 2,253 688 1,565 46,222 2,761 1,138 1,623 Commercial loans
5,084 5,730 (646) 447 (1,093) 4,771 313 463 (150) Tax-exempt loans
34,235 31,409 2,826 (3,480) 6,306 33,892 343 (1,201) 1,544 Instalment loans
32,547 22,668 9,879 (4,452) 14,331 30,569 1,978 (1,454) 3,432 Bank card loans
45,805 33,395 12,410 (1,690) 14,100 37,529 8,276 741 7,535 Real estate loans
4,448 4,015 433 500 (67) 3,956 492 410 82 Construction loans
3 - 3 3 - 1 2 2 - Foreign loans
- - ------------------------------------------------------------------------------------------------------------------------------------
171,105 143,947 27,158 (3,877) 31,035 156,940 14,165 71 14,094 Total loans - net of unearned income2
- - ------------------------------------------------------------------------------------------------------------------------------------
16,977 32,097 (15,120) (98) (15,022) 10,992 5,985 (2,849) 8,834 Securities held to maturity
- - ------------------------------------------------------------------------------------------------------------------------------------
30,869 20,799 10,070 1,882 8,188 40,249 (9,380) 1,808 (11,188) Securities available for sale
- - ------------------------------------------------------------------------------------------------------------------------------------
6,706 6,060 646 764 (118) 4,126 2,580 721 1,859 Money market investments
- - ------------------------------------------------------------------------------------------------------------------------------------
5,453 5,247 206 1 205 7,424 (1,971) 549 (2,520) Mortgage loans held for sale
- - ------------------------------------------------------------------------------------------------------------------------------------
231,110 208,150 22,960 (26) 22,986 219,731 11,379 5,162 6,217 Total earning assets
====================================================================================================================================
10,405 9,533 872 (942) 1,814 9,741 664 259 405 Interest checking deposits
15,622 14,965 657 (133) 790 13,749 1,873 1,230 643 Money market deposit accounts
9,393 7,794 1,599 (1,195) 2,794 8,321 1,072 249 823 Regular savings deposits
5,499 4,544 955 80 875 4,297 1,202 402 800 Money market certificates
27,907 24,322 3,585 (1,313) 4,898 24,908 2,999 66 2,933 Other domestic time deposits
- - ------------------------------------------------------------------------------------------------------------------------------------
68,826 61,158 7,668 (3,245) 10,913 61,016 7,810 2,724 5,086 Total interest-bearing core deposits
- - ------------------------------------------------------------------------------------------------------------------------------------
9,952 10,347 (395) 2,046 (2,441) 11,098 (1,146) 1,964 (3,110) Purchased liabilities
4,665 4,618 47 374 (327) 4,250 415 66 349 Long-term debt
- - ------------------------------------------------------------------------------------------------------------------------------------
83,443 76,123 7,320 (1,079) 8,399 76,364 7,079 4,821 2,258 Total interest-bearing liabilities
Other sources - net
- - ------------------------------------------------------------------------------------------------------------------------------------
83,443 76,123 7,320 (1,171) 8,491 76,364 7,079 4,905 2,174 Total sources of funds
- - ------------------------------------------------------------------------------------------------------------------------------------
147,667 132,027 15,640 1,145 14,495 143,367 4,300 257 4,043 Net Interest Income
====================================================================================================================================
</TABLE>
/4/Variances are computed on a line-by-line basis and are non-additive
/5/Variances caused by the change in rate times the change in balance are
allocated to rate
22
<PAGE>
Table 4 Loans To Real Estate Developers And Investors (REDI)
<TABLE>
<CAPTION>
In millions June 30,
--------------------------- March 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Commercial - developer lines $ 87.5 $ 89.7 $ 81.5 $ 101.1
Tax-exempt:
Construction 0.2 0.2 0.2 0.2
Income property mortgage 75.7 88.5 77.9 82.0
Real estate mortgage - income property 784.8 821.9 811.2 769.0
Construction 200.6 209.4 194.7 191.0
- - ------------------------------------------------------------------------------------------------------
Total REDI loans $ 1,148.8 $ 1,209.7 $ 1,165.5 $ 1,143.3
======================================================================================================
</TABLE>
Table 5 Loans To Real Estate Developers And Investors-
Geographic Distribution And Property Type
<TABLE>
<CAPTION>
June 30, 1994
Region
Total Greater
In millions Corporation Washington Eastern Western Capital
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Land acquisition and development $ 127.1 $ 74.2 $ 41.4 $ 4.5 $ 7.0
Residential developments 258.6 123.8 85.3 40.1 9.4
Commercial projects:
Office buildings 159.0 98.7 30.5 13.4 16.4
Retail stores and malls 200.3 148.8 36.3 7.7 7.5
Hotels and motels 95.9 46.9 34.6 14.4 -
Industrial buildings 153.1 107.4 17.3 4.8 23.6
- - ------------------------------------------------------------------------------------------------------
Total commercial projects 608.3 401.8 118.7 40.3 47.5
- - ------------------------------------------------------------------------------------------------------
Special use 62.4 26.3 12.8 21.2 2.1
Other 92.4 71.6 13.1 1.8 5.9
- - ------------------------------------------------------------------------------------------------------
Total REDI loans $ 1,148.8 $ 697.7 $ 271.3 $ 107.9 $ 71.9
======================================================================================================
</TABLE>
Table 6 Real Estate Loans
<TABLE>
<CAPTION>
In millions June 30,
--------------------------- March 31, December 31,
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Residential $ 1,743.0 $ 1,103.0 $ 1,643.0 $ 944.9
Income property 784.8 821.9 811.2 769.0
- - ------------------------------------------------------------------------------------------------------
Total real estate loans $ 2,527.8 $ 1,924.9 $ 2,454.2 $ 1,713.9
======================================================================================================
</TABLE>
23
<PAGE>
Table 7 Allowance For Loan Losses
<TABLE>
<CAPTION>
Dollars in thousands Second Quarter Six Months Ended June 30,
--------------------------------- ----------------------------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Beginning balance $226,577 $202,979 $210,958 $205,017
- - --------------------------------------------------------------------------------------------------------------------------
Allowance from acquisitions - net 79 22,000 15,708 22,000
- - ---------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 8,850 3,006 18,882 21,506
- - ---------------------------------------------------------------------------------------------------------------------------
Net charge-offs
(recoveries):
Commercial 2,345 6,113 3,222 12,579
Instalment 1,016 935 1,636 2,347
Bank card 5,709 4,202 10,282 8,324
Real estate (282) 1,789 4,536 8,453
Construction 76 1,968 (768) 3,866
Foreign (24) (3) (26) (27)
- - ---------------------------------------------------------------------------------------------------------------------------
Total net charge-offs 8,840 15,004 18,882 35,542
- - ---------------------------------------------------------------------------------------------------------------------------
Balance, June 30 $226,666 $212,981 $226,666 $212,981
===========================================================================================================================
Allowance for loan losses
to period-end loans 2.64% 2.95% 2.64% 2.95%
Annualized net charge-offs
to average loans 0.43 0.89 0.48 1.08
===========================================================================================================================
</TABLE>
Table 8 Nonperforming Assets And Past Due Loans
<TABLE>
<CAPTION>
Dollars in thousands June 30,
---------------------------------------- December 31,
Nonaccrual loans: 1994 1993 1993
<S> <C> <C> <C>
Commercial $ 34,698 $ 70,573 $ 37,788
Instalment 1,162 1,418 902
Real estate 35,619 32,525 33,548
Construction 5,921 13,013 5,843
- - ---------------------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 77,400 117,529 78,081
Restructured loans - 238 1,733
- - ---------------------------------------------------------------------------------------------------------------------------
Total nonperforming
loans 77,400 117,767 79,814
Foreclosed properties - net 25,000 45,033 16,951
- - ---------------------------------------------------------------------------------------------------------------------------
Total nonperforming
assets $ 102,400 $ 162,800 $ 96,765
===========================================================================================================================
Past due loans:
Commercial $ 4,170 $ 3,795 $ 2,089
Instalment:
Student 6,533 8,145 7,879
Other 2,905 1,052 1,049
Bank card 6,850 5,926 6,216
Real estate 12,698 5,040 7,758
Construction 140 61 197
- - ---------------------------------------------------------------------------------------------------------------------------
Total past due loans $ 33,296 $ 24,019 $ 25,188
===========================================================================================================================
Nonperforming assets to:
Loans and foreclosed
properties - net 1.19% 2.24% 1.32%
Total assets 0.71 1.23 0.73
Allowance for loan losses
to:
Nonperforming assets 221 131 218
Nonperforming loans 293 181 264
Allowance for loan losses
plus shareholders' equity to
nonperforming assets 13.00x 7.86x 13.16x
===========================================================================================================================
</TABLE>
24
<PAGE>
Table 9 Nonperforming Loans - Quarterly Activity
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------
In millions 1994 1993
----------------- ---------------------------
June 30 Mar. 31 Dec. 31 Sep. 30 June 30
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Beginning balance $ 89.5 $ 79.8 $ 100.1 $ 117.8 $ 118.9
- - ------------------------------------------------------------------------------------
Acquisition additions 4.0 8.1 - - 9.5
Other additions 19.2 27.4 24.7 11.7 23.4
Payments, sales and reductions (22.1) (15.0) (22.8) (15.8) (10.8)
Charge-offs (6.6) (7.1) (7.6) (9.5) (10.3)
Reinstatements to accrual status (4.1) (2.7) (10.3) (2.8) (9.4)
Transfers to foreclosed properties (2.5) (1.0) (4.3) (1.3) (3.5)
- - ------------------------------------------------------------------------------------
Net increase (decrease) (12.1) 9.7 (20.3) (17.7) (1.1)
- - ------------------------------------------------------------------------------------
Ending balance $ 77.4 $ 89.5 $ 79.8 $ 100.1 $ 117.8
====================================================================================
</TABLE>
Table 10 Foreclosed Properties - Quarterly Activity
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------
In millions 1994 1993
----------------- ---------------------------
June 30 Mar. 31 Dec. 31 Sep. 30 June 30
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Beginning balance $ 24.5 $ 17.0 $ 34.7 $ 45.0 $ 75.0
- - -----------------------------------------------------------------------------
Acquisition additions - net 6.1 15.8 - - 8.9
Additions 2.7 3.8 4.3 3.4 7.7
Market write-downs (0.2) - (4.9) (1.5) (2.8)
Reductions (8.1) (13.4) (18.2) (12.2) (36.3)
Provision for losses - 1.3 1.1 - (7.5)
- - -----------------------------------------------------------------------------
Net increase (decrease) 0.5 7.5 (17.7) (10.3) (30.0)
- - -----------------------------------------------------------------------------
Ending balance $ 25.0 $ 24.5 $ 17.0 $ 34.7 $ 45.0
=============================================================================
</TABLE>
25
<PAGE>
Table 11 Summary Of Noninterest Income And Expense
<TABLE>
<CAPTION>
In thousands Six Months Ended
Second Quarter First June 30,
--------------------------- Quarter ---------------------------
Noninterest Income 1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C>
Trust and investment advisory $ 14,441 $ 14,545 $ 15,003 $ 29,444 $ 29,267
Service charges on deposit accounts 21,116 19,882 20,779 41,895 39,740
Bank card-related 9,247 6,560 7,728 16,975 12,189
Trading account activities 302 1,486 94 395 2,753
Mortgage servicing 5,102 3,838 4,800 9,902 7,616
Mortgage origination - net 1,921 5,304 4,046 5,968 8,289
Gain on sale of mortgage servicing rights 6,230 - 3,102 9,332 2,300
Commissions on letters of credit 1,352 1,139 1,398 2,750 2,452
Miscellaneous 8,481 8,610 8,223 16,704 16,017
Securities gains (losses) (49) 1,511 (1,718) (1,767) 2,622
- - ---------------------------------------------------------------------------------------------------------------------------------
Total noninterest income $ 68,143 $ 62,875 $ 63,455 $131,598 $123,245
=================================================================================================================================
Noninterest Expense
Salaries $ 60,735 $ 53,363 $ 59,190 $119,925 $104,289
Benefits 15,257 10,860 15,607 30,864 23,192
- - ---------------------------------------------------------------------------------------------------------------------------------
Total personnel costs 75,992 64,223 74,797 150,789 127,481
Occupancy - net 10,061 9,421 10,794 20,855 18,387
Equipment 6,069 6,132 5,928 11,997 12,196
Communications 6,086 5,060 6,011 12,097 10,050
Stationery, printing and supplies 2,251 1,829 1,844 4,095 3,429
Professional fees and services 3,318 2,972 2,489 5,807 6,934
Loan expense 2,876 3,268 2,748 5,624 5,778
FDIC premiums 6,402 6,154 5,885 12,287 12,138
Advertising and marketing 4,623 3,534 3,858 8,481 6,732
Transportation 1,451 1,310 1,428 2,879 2,633
Outside data services 4,729 3,373 4,460 9,189 6,609
Amortization of purchased intangibles 5,092 5,810 4,829 9,921 9,034
Miscellaneous 10,899 8,248 8,930 19,829 14,880
- - ---------------------------------------------------------------------------------------------------------------------------------
Subtotal 139,849 121,334 134,001 273,850 236,281
Foreclosed properties 884 19,213 9 893 27,350
- - ---------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense $140,733 $140,547 $134,010 $274,743 $263,631
=================================================================================================================================
</TABLE>
Table 12 Debt Ratings
(as of July 25, 1994)
<TABLE>
<CAPTION>
Standard Thomson
Security Moody's & Poor's Bankwatch
<S> <C> <C> <C>
8 1/4% Subordinated Notes due 2002 Baa1 BBB BBB+
8 5/8% Subordinated Notes due 1998 Baa1 BBB BBB+
Commercial Paper P-2 Not rated TBW-1
Crestar Bank Deposit Notes:
Long-Term A2 A- Not rated
Short-Term P-1 A-2 TBW-1
=========================================================================
</TABLE>
26
<PAGE>
Table 13 Interest Sensitivity Analysis
<TABLE>
<CAPTION>
June 30, 1994
In millions Maturity/Rate Sensitivity
--------------------------------------------------------------------------
within 2-3 4-6 7-12 over
Uses of Funds one month months months months one year Total
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial $ 1,974.2 $ 40.3 $ 58.4 $ 58.7 $ 606.0 $ 2,737.6
Tax-exempt 164.1 0.8 2.9 3.9 44.8 216.5
Instalment 802.1 71.5 99.8 169.6 577.9 1,720.9
Bank card 145.7 29.6 25.5 16.5 936.7 1,154.0
Real estate 570.3 197.1 304.8 416.1 1,039.5 2,527.8
Foreign 0.8 - - - - 0.8
Construction 188.7 3.8 14.5 1.8 22.5 231.3
Securities held to maturity 8.3 35.0 44.1 96.8 811.8 996.0
Securities available for sale 220.0 98.0 153.8 159.2 1,362.9 1,993.9
Money market investments 1,239.0 0.1 4.9 - - 1,244.0
Mortgage loans held for sale 275.5 - - - - 275.5
- - ------------------------------------------------------------------------------------------------------------------------
Total earning assets 5,588.7 476.2 708.7 922.6 5,402.1 13,098.3
Interest sensitivity hedges
on assets (448.4) (1,079.1) 21.6 466.5 1,039.4 -
- - ------------------------------------------------------------------------------------------------------------------------
Total uses $ 5,140.3 $ (602.9) $ 730.3 $ 1,389.1 $ 6,441.5 $13,098.3
========================================================================================================================
Sources of funds
Interest checking deposits $ 1,866.4 $ - $ - $ - $ - $ 1,866.4
Money market deposit accounts 2,366.2 - - - - 2,366.2
Regular savings deposits 1,508.5 - - - - 1,508.5
Money market certificates and
other domestic time
deposits 352.5 462.2 573.2 945.4 988.4 3,321.7
Certificates of deposit
$100,000
and over 26.4 13.4 12.2 6.2 7.0 65.2
Short-term borrowings 1,326.9 0.1 - - - 1,327.0
Long-term debt 0.1 0.4 0.6 1.2 220.1 222.4
- - ------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 7,447.0 476.1 586.0 952.8 1,215.5 10,677.4
Other sources - net - - - - 2,420.9 2,420.9
Interest sensitivity hedges
on liabilities 25.0 (5.0) (20.0) - - -
- - ------------------------------------------------------------------------------------------------------------------------
Total sources $ 7,472.0 $ 471.1 $ 566.0 $ 952.8 $ 3,636.4 $13,098.3
========================================================================================================================
Cumulative maturity/rate
sensitivity gap $(2,331.7) $(3,405.7) $(3,241.4) $(2,805.1) $ - $ -
=========================================================================================================================
Adjustments
Beta adjustments:
Interest checking (beta
factor .21) $ 1,474.5
Money market accounts
(beta factor .57) 1,017.5
Regular savings (beta
factor .13) 1,312.4
Demand deposit sensitivity (1,286.3)
Cumulative adjusted maturity/
rate
sensitivty gap $ 186.4 $ (887.6) $ (723.3) $ (287.0) $ - $ -
=========================================================================================================================
</TABLE>
27
<PAGE>
Table 14 Selected Quarterly Financial Information
<TABLE>
<CAPTION>
Dollars in thousands, except per share data
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
Results of operations: 1994 1994 1993 1993 1993
<S> <C> <C> <C> <C> <C>
Net interest income/1/ $147,667 $143,367 $140,845 $138,719 $132,027
Provision for loan losses 8,850 10,032 13,500 13,769 3,006
- - ----------------------------------------------------------------------------------------------------
Net credit income 138,817 133,335 127,345 124,950 129,021
Securities gains (losses) (49) (1,718) - (385) 1,511
Other noninterest income 68,192 65,173 63,666 61,739 61,364
- - ----------------------------------------------------------------------------------------------------
Net credit and noninterest income 206,960 196,790 191,011 186,304 191,896
Noninterest expense 140,733 134,010 130,243 129,148 140,547
- - ----------------------------------------------------------------------------------------------------
Income before taxes 66,227 62,780 60,768 57,156 51,349
- - ----------------------------------------------------------------------------------------------------
Tax-equivalent adjustment 2,738 2,701 2,886 3,073 3,222
Book tax expense 20,881 19,597 19,148 16,930 14,417
- - ----------------------------------------------------------------------------------------------------
Income tax expense 23,619 22,298 22,034 20,003 17,639
- - ----------------------------------------------------------------------------------------------------
Net Income 42,608 40,482 38,734 37,153 33,710
Preferred dividend requirements - - 365 618 619
- - ----------------------------------------------------------------------------------------------------
Income applicable to common shares $ 42,608 $ 40,482 $ 38,369 $ 36,535 $ 33,091
====================================================================================================
Earnings per share:
Primary:
Net income $ 1.12 $ 1.07 $ 1.01 $ 0.96 $ 0.88
Average shares outstanding (000s) 37,930 37,835 38,063 38,154 37,440
Fully diluted:
Net income $ 1.12 $ 1.07 $ 1.00 $ 0.96 $ 0.88
Average shares outstanding (000s) 37,931 37,849 38,088 38,174 37,479
Dividends declared per common share $ 0.40 $ 0.33 $ 0.33 $ 0.28 $ 0.28
====================================================================================================
Selected ratios and other data:
Return on average assets 1.25% 1.22% 1.20% 1.15% 1.09%
Return on average total equity 15.79 14.83 14.19 13.84 13.24
Return on average common equity 15.79 14.83 14.60 14.20 13.60
Net interest margin/1/ 4.76 4.78 4.77 4.77 4.73
Net charge-offs as % of average loans 0.43 0.53 0.87 0.78 0.89
Allowance as % of period-end loans 2.64 2.75 2.89 3.02 2.95
Overhead ratio 65.21 64.79 63.69 64.55 72.11
Average total equity to assets 7.90 8.20 8.45 8.34 8.22
Equity leverage 12.66x 12.19x 11.84x 11.99x 12.17x
Full-time equivalent employees (period end) 6,868 6,733 6,279 6,179 6,180
====================================================================================================
</TABLE>
/1/Tax-equivalent basis
28
<PAGE>
Table 15 Consolidated Average Balances/Net Interest Income/Rates /1/
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------------------------------------------
1994 1993
------------------------------------ ------------------------------------
Dollars in thousands Income/ Yield/ Income/ Yield/
Balance Expense Rate Balance Expense Rate
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets $ $ % $ $ %
Securities held to maturity/2/ 953,249 16,977 7.02 1,793,327 32,097 7.15
Securities available for sale/2/ 2,129,177 30,869 5.82 1,527,754 20,799 5.45
Money market investments/2/ 680,182 6,706 3.95 693,698 6,060 3.50
Mortgage loans held for sale/2/ 308,872 5,453 7.06 297,276 5,247 7.06
- - -----------------------------------------------------------------------------------------------------------------
Commercial loans 2,564,103 48,983 7.58 2,480,790 46,730 7.54
Tax-exempt loans 217,577 5,084 9.37 268,852 5,730 8.55
Instalment loans 1,700,077 34,235 8.16 1,415,055 31,409 8.86
Bank card loans 1,075,560 32,547 11.91 652,415 22,668 13.63
Real estate loans 2,464,921 45,805 7.43 1,730,574 33,395 7.70
Construction loans 225,441 4,448 7.90 229,252 4,015 7.02
Foreign loans 379 3 2.96 42 - -
- - -----------------------------------------------------------------------------------------------------------------
Total loans-net of unearned/2,3/ 8,248,058 171,105 8.27 6,776,980 143,947 8.47
Allowance for loan losses (230,687) (218,584)
- - -----------------------------------------------------------------------------------------------------------------
Loans - net 8,017,371 6,558,396
Cash and due from banks 713,487 692,274
Premises and equipment - net 319,630 290,889
Customers' liability on
acceptances 9,651 17,527
Intangible assets - net 147,382 92,668
Foreclosed properties - net 23,480 64,077
Other assets 362,053 367,727
- - -----------------------------------------------------------------------------------------------------------------
Total Assets 13,664,534 12,395,613
========== ==========
Total Earning Assets 12,319,538 231,110 7.48 11,089,035 208,150 7.49
========== ======= ==== ========== ======= ====
Liabilities And Shareholders'
Equity
Interest checking deposits 1,893,459 10,405 2.20 1,590,811 9,533 2.40
Money market deposit accounts 2,409,660 15,622 2.60 2,288,838 14,965 2.62
Regular savings deposits 1,446,340 9,393 2.60 1,064,632 7,794 2.94
Money market certificates 690,701 5,498 3.25 579,141 4,544 3.16
Other domestic time deposits 2,572,655 27,908 4.40 2,130,438 24,322 4.62
Certificates of deposit $100,000
and over 52,594 572 4.37 43,635 496 4.56
Deposits in foreign offices - - - 2,697 18 2.78
- - -----------------------------------------------------------------------------------------------------------------
Total savings and time deposit/2/ 9,065,409 69,398 3.10 7,700,192 61,672 3.22
Demand deposits 2,075,899 1,900,146
- - -----------------------------------------------------------------------------------------------------------------
Total deposits 11,141,308 9,600,338
Short-term borrowings/2/ 1,008,561 9,380 3.74 1,338,785 9,833 2.97
Long-term debt/2/ 220,094 4,665 8.48 236,872 4,618 7.80
Liability on acceptances 9,423 17,527
Other liabilities 205,990 183,736
- - -----------------------------------------------------------------------------------------------------------------
Total liabilities 12,585,376 11,377,258
- - -----------------------------------------------------------------------------------------------------------------
Preferred stock - 45,000
Common shareholders' equity 1,079,158 973,355
- - -----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,079,158 1,018,355
- - -----------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity 13,664,534 12,395,613
========== ==========
Total interest-bearing liabilities 10,294,064 83,443 3.26 9,275,849 76,123 3.30
Other sources-net 2,025,474 1,813,186
- - -----------------------------------------------------------------------------------------------------------------
Total Sources of Funds 12,319,538 83,443 2.72 11,089,035 76,123 2.76
========== ====== ==== ========== ====== ====
Net Interest Spread 4.22 4.19
Net Interest Income/Margin 147,667 4.76 132,027 4.73
=================================================================================================================
</TABLE>
/1/ Income and yields on a tax-equivalent basis computed using the statutory
federal income tax rate exclusive of the alternative minimum tax and
nondeductible interest expense.
29
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended June 30,
1994 1994
------------------------------------ ------------------------------------
Dollars in thousands Income/ Yield/ Income Yield/
Balance Expense Rate Balance Expense Rate
---------- -------- ------ ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets $ $ % $ $ %
Securities held to maturity/2/ 528,507 10,992 8.32 742,051 27,969 7.49
Securities available for sale/2/ 2,948,914 40,249 5.54 2,536,781 71,118 5.65
Money market investments/2/ 468,907 4,126 3.57 575,128 10,832 3.80
Mortgage loans held for sale/2/ 467,598 7,424 6.35 387,797 12,877 6.64
- - ----------------------------------------------------------------------------------------------------------------------------
Commercial loans 2,476,846 46,222 7.55 2,520,716 95,205 7.58
Tax-exempt loans 224,653 4,771 8.61 221,095 9,854 8.99
Instalment loans 1,625,825 33,892 8.34 1,663,155 68,127 8.23
Bank card loans 966,242 30,569 12.58 1,021,203 63,116 12.27
Real estate loans 2,050,782 37,529 7.33 2,258,996 83,335 7.38
Construction loans 220,881 3,956 7.26 223,174 8,404 7.59
Foreign loans 387 1 0.82 383 4 1.89
- - ----------------------------------------------------------------------------------------------------------------------------
Total loans-net of unearned/2,3/ 7,565,616 156,940 8.32 7,908,722 328,045 8.30
Allowance for loan losses (218,583) (224,668)
- - ----------------------------------------------------------------------------------------------------------------------------
Loans - net 7,347,033 7,684,054
Cash and due from banks 718,741 716,099
Premises and equipment - net 308,012 313,853
Customers' liability on acceptances 13,839 11,734
Intangible assets - net 106,165 126,888
Foreclosed properties - net 23,792 23,635
Other assets 377,732 369,849
- - ----------------------------------------------------------------------------------------------------------------------------
Total Assets 13,309,240 13,487,869
========== ==========
Total Earning Assets 11,979,542 219,731 7.37 12,150,479 450,841 7.43
========== ======= ==== ========== ======= ====
Liabilities And Shareholders' Equity
Interest checking deposits 1,817,810 9,741 2.17 1,855,844 20,146 2.19
Money market deposit accounts 2,301,992 13,749 2.42 2,356,124 29,371 2.51
Regular savings deposits 1,316,111 8,321 2.56 1,381,585 17,714 2.59
Money market certificates 582,295 4,297 3.02 636,797 9,794 3.14
Other domestic time deposits 2,303,715 24,908 4.42 2,438,928 52,815 4.41
Certificates of deposit $100,000 and over 46,949 474 4.10 49,787 1,048 4.24
Deposits in foreign offices 1,427 11 3.08 710 11 3.08
- - ----------------------------------------------------------------------------------------------------------------------------
Total savings and time deposit/2/ 8,370,299 61,501 2.99 8,719,775 130,899 3.04
Demand deposits 2,014,697 2,045,467
- - ----------------------------------------------------------------------------------------------------------------------------
Total deposits 10,384,996 10,765,242
Short-term borrowings/2/ 1,425,708 10,613 3.02 1,215,982 19,993 3.32
Long-term debt/2/ 203,376 4,250 8.36 211,781 8,915 8.42
Liability on acceptances 13,839 11,619
Other liabilities 189,609 197,845
- - ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 12,217,528 12,402,469
- - ----------------------------------------------------------------------------------------------------------------------------
Preferred stock - -
Common shareholders' equity 1,091,712 1,085,400
- - ----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,091,712 1,085,400
- - ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity 13,309,240 13,487,869
========== ==========
Total interest-bearing liabilities 9,999,383 76,364 3.10 10,147,538 159,807 3.18
Other sources-net 1,980,159 2,002,941
- - ----------------------------------------------------------------------------------------------------------------------------
Total Sources of Funds 11,979,542 76,364 2.59 12,150,479 159,807 2.66
========== ====== ==== ========== ======= ====
Net Interest Spread 4.27 4.25
Net Interest Income/Margin 143,367 4.78 291,034 4.77
============================================================================================================================
<CAPTION>
Six Months Ended June 30,
------------------------------------
1993
----------------------------------
Dollars in thousands Income/ Yield
Balance Expense Rate
---------- ------- ------
<S> <C> <C> <C>
Assets $ $ %
Securities held to maturity/2/ 1,715,384 62,771 7.32
Securities available for sale/2/ 1,487,112 40,508 5.45
Money market investments/2/ 910,222 15,362 3.40
Mortgage loans held for sale/2/ 283,945 10,314 7.26
- - ----------------------------------------------------------------------------------
Commercial loans 2,488,368 94,744 7.67
Tax-exempt loans 275,235 11,696 8.57
Instalment loans 1,391,872 63,049 9.06
Bank card loans 599,480 42,990 14.25
Real estate loans 1,624,920 64,607 7.96
Construction loans 219,645 7,639 7.01
Foreign loans 35 14 -
- - ----------------------------------------------------------------------------------
Total loans-net of unearned/2,3/ 6,599,555 284,739 8.65
Allowance for loan losses (214,173)
- - ----------------------------------------------------------------------------------
Loans - net 6,385,382
Cash and due from banks 667,726
Premises and equipment - net 286,133
Customers' liability on acceptances 18,382
Intangible assets - net 87,221
Foreclosed properties - net 70,903
Other assets 353,023
- - ----------------------------------------------------------------------------------
Total Assets 12,265,433
==========
Total Earning Assets 10,996,218 413,694 7.54
========== ======== ====
Liabilities And Shareholders' Equity
Interest checking deposits 1,558,809 18,806 2.43
Money market deposit accounts 2,271,164 29,954 2.66
Regular savings deposits 1,003,563 14,651 2.94
Money market certificates 580,337 9,535 3.32
Other domestic time deposits 2,111,816 48,716 4.68
Certificates of deposit $100,000 and over 45,073 1,052 4.71
Deposits in foreign offices 2,529 35 2.81
- - ----------------------------------------------------------------------------------
Total savings and time deposit/2/ 7,573,291 122,749 3.28
Demand deposits 1,831,269
- - ----------------------------------------------------------------------------------
Total deposits 9,404,560
Short-term borrowings/2/ 1,458,625 21,889 3.03
Long-term debt/2/ 223,654 9,008 8.06
Liability on acceptances 18,382
Other liabilities 166,421
- - ----------------------------------------------------------------------------------
Total liabilities 11,271,642
- - ----------------------------------------------------------------------------------
Preferred stock 45,000
Common shareholders' equity 948,791
- - ----------------------------------------------------------------------------------
Total shareholders' equity 993,791
- - ----------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity 12,265,433
==========
Total interest-bearing liabilities 9,255,570 153,646 3.35
Other sources-net 1,740,648
- - ----------------------------------------------------------------------------------
Total Sources of Funds 10,996,218 153,646 2.83
========== ======= ====
Net Interest Spread 4.19
Net Interest Income/Margin 260,048 4.71
==================================================================================
</TABLE>
/2/ Indicates earning asset or interest-bearing liability.
/3/ Nonaccrual loans are included in the average loan balances and income on
such loans is recognized on the cash basis.
30
<PAGE>
Item 4. Submission Of Matters To A Vote Of Security Holders
The Annual Meeting of Shareholders of Crestar Financial Corporation was held on
April 22, 1994 for the purpose of electing seven members of the Board of
Directors and ratifying the appointment of independent auditors for the year.
Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and there were no solicitations in opposition
to the recommendations of the Board of Directors on the matters voted on.
Six Class I directors and one Class II director were elected for three-year and
one-year terms as follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted
"For" "Withheld"
Director
<S> <C> <C>
Class I - three-year term:
J. Carter Fox 31,658,468 132,185
Patrick D. Giblin 31,644,193 146,460
Gene A. James 31,655,565 135,088
H. Gordon Leggett, Jr. 31,653,749 136,904
Patrick J. Maher 31,657,790 132,863
Gordon F. Rainey, Jr. 31,653,725 136,928
Class II - one-year term:
Bonnie Guiton Hill 31,640,887 149,766
</TABLE>
The following Class II directors' terms expire in 1995:
Frank E. McCarthy William F. Vosbeck
G. Gilmer Minor III James M. Wells III
Eugene P. Trani
The following Class III directors' terms expire in 1996:
Richard M. Bagley Richard G. Tilghman
Charles R. Longsworth L. Dudley Walker
Frank S. Royal Karen Hastie Williams
The appointment of KPMG Peat Marwick as the Corporation's independent auditors
for 1994 was ratified as follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted Shares Voted
"For" "Against" "Abstain"
<S> <C> <C>
31,453,860 124,303 212,490
</TABLE>
There were no "broker non-votes" in connection with the annual meeting. All
matters voted on were considered "routine" under New York Stock Exchange rules.
31
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Crestar Financial Corporation
---------------------------------
Registrant
Date August 12, 1994 /s/ James D. Barr
---------------------- ---------------------------------
James D. Barr
Executive Vice President,
Controller and Treasurer
32
